Manchester Update

Recent research by Avison Young and MOAF reveals that Manchester city centre office activity reached 491,300 sq ft during Q2. The figure was 64% above the quarterly average and brings the year to date total to over 800,000 sq ft. Metropolis ran 40 business leads featuring companies relocating in the Manchester market in Q2 2019.

The largest move of the quarter involved Spaces agreeing the largest flexible workspace deal in the UK outside London, taking 122,000 sq ft at 125 Deansgate.  It also understood that BT is close to taking a significant amount of space. Other large moves recently researched by Metropolis included relocations by Hewlett Packard, ME Group, Jones Lang Lasalle and BASF.

There is considerable activity from the flexible workspace sector as WeWork has signed for its fourth location in Manchester, 51,000 sq ft at Hyphen and there are more than half a dozen co-working operators
looking for substantial amounts of space. Business services tends to dominate take-up in Manchester, accounting for a third of take-up.

Advertising and public relations company WPP have committed to 82,000 sq ft which will be constructed at Enterprise City, St John’s. Barclays expanded by 33,000 sq ft at Piccadilly Place. The largest deal in the out-of-town market was to telecommunications company Verastar, which has agreed a 61,000 sq ft deal at One Dovecoat in Sale. Marks & Spencer took 12,000 sq ft at the Alexandra, The Home Office taking 20,490 sq ft at the Soapworks and Capgemini taking 11,360 sq ft at Venus.

Looking ahead, Metropolis is monitoring almost 40 medium/large firms looking for space in Manchester, together with a further 70 tenants approaching lease expiries over the next two years.

There is 1.6 million sq ft of space under construction in Manchester, of which 38% is pre-let. Of the million sq ft of speculative space under construction, key developments include Landmark Oxford Road, 100 Embankment and Circle Square. Grade A remains in good stock with new developments such as 125 Deansgate and Landmark at St Peter’s Square due to complete in 2019. Between them they will bring 305,000 sq ft to the market, 133,000 sq ft of this currently under offer to new tenants.

Manchester Office Market Update

Recent research by Metropolis saw nearly 40 office Manchester moves confirmed in the first quarter of 2019, which is 10% above the same period last year. Furthermore, there are over 100 companies either searching or due to make decisions on future office space searches in 2019.

Local office agents expect take-up in the city centre market to top 1m sq ft for the sixth year running following a steady start to 2019. The first quarter of the year saw 314,733 sq ft of lettings according to the figures from the Manchester Office Agents Forum. The largest transaction so far this year is the long-awaited 47,465 sq ft pre-let at Two New Bailey to law firm Eversheds Sutherland.

Other large deals included co-working operator Huckletree taking 25,800 sq ft at the Express Building, the General Medical Council taking 22,000 sq ft at 3 Hardman Square and Knights Professional Services taking 16,272 sq ft at Two St Peter’s Square. Moneysupermarket.com took space at No. 1 Spinningfields at £35 per sq ft, a new record rent for the city.

The headline requirement is to BT, which it has recently increased its search to 150,000 sq ft. The out-of-town market saw lettings to two utilities companies Smart DCC and Landis & Gyr. There were also a number of deals to tech companies such as Capgemini, Playdemic and Cetus Solutions.

Analysis by Savills points to a diverse base of office occupiers, who are attracted to the city as a result of its strong talent pool, establishing it further as a key location outside of London.

Savills research points to a Manchester’s office market with record 2018 take-up levels of 1,750,276 sq ft, representing a 44 per cent year-on-year increase. It was also the fifth consecutive year that Manchester saw city centre take-up in excess of 1.2 million sq ft.

Recent office mover activity has been dominated by TMT, professional, financial services and public sector markets as well as co-working providers.

Manchester has seen an influx of flexible and serviced office providers looking to establish a presence outside of London including WeWork, Work Life and Central Working taking space as well as smaller independent providers.

Looking ahead, Metropolis has plans to speak to a further Manchester office occupiers that are approaching lease expiries on their office space over the next two years.

Paul Ives, Metropolis

Media Sector and the London Office Market

The recent signing of a large pre-let of 124,000 sq ft of new London HQ offices by Sony at 4 Handyside Street, Kings Cross has brought renewed focus onto the contribution of the media sector to London’s office market. Metropolis looks at the importance of the media sector to office transactions and relocation moves in London.

In 2018, the technology and media sector once again dominated the London’s leasing profile, accounting for 27% of take-up across central London at around 3m sq ft and signing two of the year’s three largest deals. This is the third consecutive year that the sector has finished the year in the top spot. In many respects, the media and tech sector has been the standard bearer for London’s continued global magnetism

Kings Cross has become a popular destination for the creative and media sector with recent moves agreed with Universal and PRS for Music. In addition, Google and Facebook, which straddle the line between media and technology companies, also chose Kings Cross as their London HQ destinations.

Other large media sector moves announced recently, have included WPP agreeing to centralise HQ functions at 1 Southwark Bridge Road, SE1 and McCann Worldgroup pre-letting nearly 150,000 sq ft at the under construction 135 Bishopsgate, EC2.

Metropolis has also recently run large London moves planned by Publicis, Datamonitor, Ree, Macmillan Publishers and Trade Desk.

Media occupiers have been active across all sub-markets, but they have been particularly dominant in the West End, accounting for over 30% of all activity in 2018. In Midtown, Herbal House, EC1 and The Farmiloe, EC1 attracted a variety of media and creative tenants. Research by Colliers shows that media sector tenants negotiate the shortest lease lengths and therefore the sector is the most likely to be looking for its next move.

Looking ahead, there are 220 London based media companies approaching lease expiries in the next two years. Metropolis is tracking over 130 which have expressed an interest in a move. Future large identified requirements include: 20th Century Fox (80,000 – 100,000 sq ft) and The Telegraph Media Group (70,000 – 80,000 sq ft).

For further analysis and details contact Paul Ives at Metropolis

Rise of the pre-let

Recent research by Metropolis revealed that a total of 133 occupiers were involved in pre-let searches or deals during 2018. These included a wide variety of moves across the whole of the UK. In London, a record breaking 39 pre-let deals were signed during 2018 totalling 3.8m sq ft, ahead of the previously record-breaking 2.74 million sq ft of pre-lets agreed in 2013.

Reasons given by occupiers for the risingof pre-lets are varied, but include upcoming lease events, continued limited new developments coming on the market and faith in London. It is clear that tech and media firms are making significant long-term commitments to new buildings, alongside traditional City occupiers, including those in the insurance and financial sectors. 2018 was the year that global brands made big commitments, including the likes of real estate-savvy Facebook and Sony both committing to new European headquarters in the West End and King’s Cross.

Metropolis has identified up to 50 named occupiers, which have on-going London searches, which could sign pre-lets on under construction, new or newly refurbished office space in 2019.

Recent research by Cushman & Wakefield indicated that over the last ten years there has been a total of 24.4 million sq ft of office space let pre-let transactions completed. On average, there were 27
pre-lets each year over this period, with the peak being 2013 and 2014. Pre-letting is more common in the City, Docklands and City fringe, than in the West End.

Large pre-lets from TMT (tech, media and telecom) companies in recent years including Apple’s acquisition at Battersea Power Station (475,000 sq ft), Dentsu Aegis Network’s 312,000 sq ft deal at 1 Triton Square, Linkedin in Farringdon and Facebook’s recent commitment at King’s Cross (600,000 sq ft). Banking & financial occupiers were the next most active sector, accounting for 31% of total pre-let volumes over the last ten years, including Deutsche Bank’s future relocation into 21 Moorfields (469,000 sq ft), SMBC’s acquisition at 100 Liverpool Street (161,000 sq ft), Wells Fargo and TP ICAP’s pre-let of part of 135 Bishopsgate (122,000 sq ft).

Public sector and government occupiers have also driven pre-let volumes, including large-scale consolidations from HMRC, FCA and TfL, as well as the Chinese Embassy’s transaction at Royal Mint Court.

King’s Cross is one of the most popular desinations for new office stock secure pre-let in recent years, including deals in 2018 to Nike (63,000 sq ft), Facebook, Google, Spaces and WeWork. West End submarkets such as White City, Battersea and Nine Elms have have also attracted significant pre-lets including in 2018, Penguin Random House (83,000 sq ft).

It is clear that occupiers are looking beyond the traditional core office markets. Banking & financial occupiers took the largest share of tower pre-lets over the last 10 years with 32% of total volumes, matched by insurance companies (32%). Some 17% of lettings were prelet prior to construction and 29% let during the construction process, compared to 54% let post completion.

Outside of London, Barclays pre-let 470,000 sq ft at Buchanan Wharf in Glasgow. The new campus complex will house existing Glasgow staff along with new positions created in technology and operations functions. in Manchester, Booking.com has pre-let 222,000 sq ft at St John’s Building, as the new global headquarters for its ground transportation division, consolidating four offices around the city.

Research has revealed that larger occupiers are considering their options 3-4 years ahead of a move, especially if the target is a move in the core districts. Trends also include some smaller pre-lets with shorter leases, particularly whilst schemes are under construction. Competition for core space is making fringe locations more desirable, especially with the possibility of rental savings.

Metropolis is currently tracking over 100 occupiers looking for over 20,000 sq ft of offices in 2019-20, more than half of which could consider a pre-let.

Paul Ives Metropolis Head of Research – paul@metroinfo.co.uk

Edinburgh Boost

Recent figures on the Edinburgh office market in 2018 revealed that take-up totalled 855,000 sq ft (79,461 sq m) in 2018. This level of office lettings exceeds the ten year average for the fourth year running according to Cushman & Wakefield and just fails to beat the record 1.05m sq ft of office moves registered in 2017.

Some of the larger deals in Edinburgh last year include Baillie Gifford acquiring 60,000 sq ft at Chris Stewart Group’s 20 West Register Street, Royal London taking 47,000 sq ft from Aviva at 22 Haymarket Yards, Artemis taking 13,710 sq ft at Exchange Plaza and law firms Brodies securing 43,000 sq ft and Pinsent Mason taking 25,000 sq ft at BAM/Hermes’ new development at Capital Square. Diageo’s pre-let 11-12 Lochside Place and Charles River expanded at Clearwater House, Heriot-Watt Research Park and now occupy the full building

Metropolis ran 200 leads on Edinburgh occupier’s move intentions including 50 companies searching for alternative space and a further 60 which have yet to decide whether to view space.

The insurance and financial services sectors have been particularly active within Edinburgh, accounting for 45% of Edinburgh’s total take-up – while they typically form an active part of the market this is a 54% increase on the five-year average. Major occupiers are signing deals to pre-let the best new space under construction, leaving limited choice for occupiers coming to lease breaks who want to upgrade.

Vacancy rates have come down even further from 3.55 per cent in Q2 to 3.35 per cent in Q4.

Looking ahead, only future schemes at 2 Semple Street and 80 George Street are capable of providing supply of Grade A office space. However, over the longer term, Edinburgh now has its development hopes pinned on the future of the planned scheme at The Haymarket, following the sale to M&G.

Metropolis is currently tracking 40 Edinburgh based occupiers with future move plans and a further 60 office occupiers which are expected to come to a decision in 2019.

Metropolis Leads in July 2018

Metropolis ran 592 business leads on ‘office movers’ in July 2018. If all reported moves were added together the total would exceed 16 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 270 business leads during month, but there were also strong showings from the South East (71),  Scotland (69) North West (38) and Yorkshire (36). Financial services and business services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves and top picks amongst the 592 July leads, included those on occupiers Facebook, Linklaters, Barclays, EBRD and Diageo.

The July 2018 leads included 172 ‘identified requirements’, including 90 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 172 searches, 105 were newly posted office searches, not previously notified to clients.

The most recent research also included 142 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was late 2021.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Andy at andy@metroinfo.co.uk, mentioning ‘Metropolis Blog’

Regional Office Boost

CBRE’s recent report ‘United Kingdom Office – The Property Perspective H1 2018’ concludes that office mover activity in the regions outside London continued to be ‘lively’ during the first half of 2018

CBRE say that regional office occupier markets in the first half of 2018 with few signs of Brexit-related uncertainty. The ten regional cities monitored by CBRE, saw take-up reach nearly 3.9m sq ft, which was 24% above the five-year average and 37% higher than the 2.8m sq ft newly occupied in the same period of 2017.

CBRE saw large numbers of requirement in regional cities and say that relocation activity could have been even higher if there had not been a shortage of new office space in some cities. CBRE particularly point to shortages in Bristol, Edinburgh and Glasgow where the development pipeline has not kept pace with demand. These shortages will drive further pre-let and refurbishment activity.

Metropolis echoes the CBRE findings, with nearly 400 regional office requirement leads flagged to subscribers in the first half of 2018, together with a similar number of companies finding space for moves between January and June.

CBRE say that The UK’s flexible office space operators continued to expand, with Bristol, Birmingham, Glasgow, and the wider South East the stand out expansion locations in H1. Bristol witnessed a
notable increase in demand with a key deal to Runway East (30,000 sq ft). In Birmingham, deals were concluded with BE Group, Instant, iHub, Regus and Orega, whilst in Glasgow there were prominent deals to
Orega and Regus. In the wider South East region, flexible office space providers took nearly 200,000 sq ft with Slough and Reading the most popular locations. Runway East and other operators also have live requirements in all the regional cities, with CBRE predicting more activity from this sector in H2.

Regional cities saw a record year of take-up in 2017, with the public sector playing a large role in regional office space demand in H1 2018 (just over 0.9m sq ft). HM Revenue & Customs accounted for the three largest transactions ranging between 157,000 – 270,000 sq ft in Manchester, Glasgow and Liverpool.

CBRE forecast the West Midlands as a region to watch. They say the West Midlands is experiencing some of the fastest growth in the country – Birmingham itself seeing prices rise by 6.9% in the year to May Birmingham is attracting public sector bodies, looking for more affordable solutions away from London. The latest requirement is from the General Dental Council, relocating 200 staff London.

4000 office moves for 2018-19

Metropolis has broken new records after 7,200 office business leads were published in 2017. If all the office space contained within those leads were added together the total would top 200 million sq ft.

Covering office deals agreed, companies searching for space, those with potential requirements and a small number of key speculative schemes, the 7,200 leads covered the whole UK from the tip of Cornwall to the north of Scotland. Office sizes ranged from 1,500 sq ft for 10 staff to Google’s new 800,000 sq ft London HQ.

Key points:

• 2,700 company office moves confirmed to have completed in 2017;

 

• 3,200 office moves are planned for 2018 and 890 office moves already planned in 2019 or later;

 

• 3,000 companies, including 1,300 with ‘identified requirements’ expect to be making property decisions in 2018 and 2019;

 

IT and media services is the largest sector (800 leads) followed by financial services (600 leads) and professional, including large numbers of accountants and law firms (450 leads). Although the leads are spread over all UK regions, the size of the London office market, means that over 40% of the leads feature relocations, both scheduled and planned in central London. All leads include contact names, telephone numbers and 75% have email addresses, many of which are specific to the decision maker.

Metropolis remains the largest specialist provider of market intelligence led, office market business leads.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business opportunities on the database in recent months exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages or to discuss a trial, then please email Simon at simon@metroinfo.co.uk